Rooting Your Portfolio in Positive-Impact Real Estate

Can an investment help the pocketbook and the planet at the same time?

Definitely, says R. Paul Herman, author of The HIP Investor: Making Better Profits by Building a Better World. Following is an excerpt from Herman’s book. Explore the options, and put your money on a wiser course…

What frameworks are useful in evaluating real estate investments? The Sustainable Land Development Initiative (SLDI), a member-owned organization dedicated to promoting land development around the world, seeks to balance the needs of people, planet and profit – for today and future generations. SLDI is piloting a project at Ocean Mountain Ranch in Oregon using its “SLDI Code” (based on a holistic model) to pioneer innovations in eco-forestry and sustainable living (http://www.triplepundit.com/author/sldi/).

Green Investing – By R. Paul Herman

As the world now has 7 billion people, what innovative approaches to housing, land and forestry are available to investors?

A potential allocation for a HIP portfolio is investing in real estate and forestry, which can offer interesting opportunities for increased human impact and profit. Half of wood use worldwide is for subsistence use, specifically energy and cooking, says Peter Mertz, CEO of Global Forest Partners. “We seek to deliver units of wood from much smaller areas and in a sustainable way that is also profitable,” he said at the Social Capital Markets conference in San Francisco in September 2009, describing his firm’s investment approach. Global Forest Partners (GFP), a forestry-focused investment manager, manages $3 billion in assets, where half of its investing is allocated to sustainably cultivating forests in emerging markets. These yield both profit and positive human impact, by creating jobs, building a safety net for the community, and establishing a sustainable foundation for societal advancement.

“We are replacing rural development, like ranching and cattle, with more sustainable development,” he says. GFP offers housing for workers, not just managers, as well as showers for daily good hygiene, complete with stocked personal care products. Workers bring their families to the camps on weekends to show off the amenities, he says, continuing: “I was educated as a forester, so I think at a different level of responsibility.” This approach requires more investment to achieve the positive impact, but it also results in lower risks, more dedicated workers and an above-market profit. GFP is registered as an investment adviser that offers managed accounts and co-mingled funds to invest in these projects, which have delivered 9 percent annual returns over the past decade, according to GFP.

What frameworks are useful in evaluating real estate investments? The Sustainable Land Development Initiative (SLDI), a member-owned organization dedicated to promoting land development around the world, seeks to balance the needs of people, planet and profit – for today and future generations. SLDI is piloting a project at Ocean Mountain Ranch in Oregon using its “SLDI Code” (based on a holistic model) to pioneer innovations in eco-forestry and sustainable living.

The potential financial benefits of investing in conservation are clear. Whether a landowner chooses to solicit public or private sources of funding, they have a wide range of options from which to choose. In many cases, the best approach can even involve generating revenue from both sets of funding sources… Regardless of the approach taken by a landowner, ensuring the economic viability of his or her land is a key step in achieving genuine sustainability. As Verilyn Klinkenbord, author of Crossing Borders: Good News from the Badlands, wrote, “Many have said, ‘The land must be productive.’ By saying this, they aren’t just articulating an old-fashioned view about man’s dominance over nature. They are arguing for what one neighbor calls ‘working wilderness.’ They are saying that unless there is some economic return to the land, there is no defense at all against the pressures of development, which are spiraling outward from nearly every city and small town in the West.”

http://twitter.com/SustainLandDev SLDI

GRANTHAM: Capitalism Is Great, But It Assigns No Value To Your Grandchildren Leo Hickman, The Telegraph |Apr. 16, 2013

….On good, long-term investments

My view of food leads me to believe that a spectacular investment is in farm land and in forestry. Or, if you prefer it, land. They don’t make any more of it, as they say.

Fifteen years ago we started a forestry division [at GMO] because I had fallen in love with land and trees and because I realised it was a mispriced asset class. We have done extremely well in that sector outperforming the benchmark for 15 years.

I think farm land is a terrific investment area. But that doesn’t mean that some mid-western land isn’t ahead of itself because of recent grain prices. It’s a very inefficient asset class and every farm is different, but you can hunt around the edge, and outside America, and you can find a decent return in an equity market that is becoming, in the US at least, rather overpriced.

If you were to buy a farm, and I would be urging any buyer to think in terms of the sustainability of the farming technique, but here again our farming portfolio is relatively green but it’s not by any means limiting itself to sustainable or organic farming.

My foundation, on the other hand, is at the early stages of what I hope to be a long and interesting experiment of investing in this kind of more avant garde sustainable farming….

Ari Frankel, head of ESG strategy, real estate, at Deutsche Asset & Wealth Management, joined REIT.com for a video interview at NAREIT’s 2014 Leader in the Light Working Forum in San Francisco.

Frankel was asked why gathering sustainability data has become a key project for the REIT industry. He responded that 100 percent of studies that have looked at the connection between sustainability performance and financial performance have demonstrated a positive correlation, which isn’t the case in other asset classes.

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